The Pay-to-Quit Program

Managers need to create incentives that will encourage employees to reveal their true levels of motivation. One such strategy is to offer employees money to resign voluntarily — the so-called Pay-to-Quit strategy. Zappos, the online shoe and clothing retailer, was the first to employ the strategy, making what has become known as “the offer”: a bonus for new hires to quit following a four-week training period if they didn’t feel that their job was a good fit for them.

One outcome of this strategy is that those who stay are more motivated, of course. But an additional benefit is that those who stay feel the need to justify that decision to themselves — which they typically do by working harder toward longer-term objectives. If they turn the Pay to Quit money down, in effect they invest it in their future with the company. This boosts their productivity and commitment.

Everybody wins with this strategy. It allows managers to identify which employees are genuinely motivated and which are not; it allows unmotivated employees to make an amicable departure with money in hand; and it allows motivated employees to genuinely demonstrate their commitment. And if nobody takes the offer, that’s also a positive outcome: The company ends up learning something important about its new hires and providing them with a motivational boost — at no cost.

It’s hard to judge the success of such incentive-based programs without running a controlled study. How can you really know if the right people are quitting, or if those who stay get a moral boost from doing so? To find out, you need to run an experiment that includes a control group that is not offered the incentives, which you can compare to a group that is offered them.

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